Critical Components of an Effective Incident Response Plan

Is your financial institution (FI) prepared to address and analyze future incidents? After all, it's no longer a matter of whether your FI will face risk-related incidents—it's a question of when. 

The key to minimizing damage and ensuring quick recovery lies in a strong, adaptable incident response plan. Is your FI's incident response plan up to the challenge? Are you taking all the necessary steps to stay ahead of emerging threats? Should you adjust your current plan? Keep these questions in mind as we explore how to safeguard your institution with an effective incident response plan.  

What qualifies as an "incident?"  

An incident is any event, external or internal, that disrupts a financial institution's operations, data, financials, clients, reputation, or regulatory standing. Examples of incidents include natural disasters like tornadoes, fires, and floods, as well as security threats like a gunman in or near the branch.  

Incidents can involve data theft, such as unauthorized individuals entering the branch and potentially stealing sensitive information, or digital breaches, such as cyberattacks. Fraud, criminal activity, and system outages are also examples of incidents.   

Why you should have an incident response plan  

Depending on the scope of an incident, it can affect the institution, its customers or members, and/or its employees. Financial institutions don’t want to be left scrambling to respond when there’s a business disruption. Advanced planning and testing of the plan is essential to responding quickly and effectively. 

Regulatory bodies also have specific requirements when it comes to the implementation of effective incident response plans.  

According to a 2021 interagency rule from the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board, and the Federal Deposit Insurance Corporation (FDIC), banks are required to notify their regulators "as soon as possible and no later than 36 hours after the bank determines that a computer-security incident that rises to the level of a notification incident has occurred.” The Federal Financial Institutions Examination Council (FFIEC) also outlines requirements for incident response plans, including specifics on preparation and testing, in its Information Technology Examination Handbook. Most recently, the National Credit Union Association (NCUA) released a letter outlining new requirements for notifying the NCUA about cyber incidents within 72 hours of a credit union being made aware of a potential incident. Some states also have notification requirements after a cyber incident. These are in addition to business continuity management requirements. 

While many FIs, if not most, recognize the impact of incidents on their organization's security and regulatory status, they may not have an updated, tested incident response plan in place.  

The components of an incident response plan    

Incident response plans can differ depending on the organization's goals, size, and resources. While every FI's incident response plan will look slightly different, many (if not all) of these components should appear on your FI's incident response plan checklist. 

Testing requirements 

It's better to be safe than sorry, and one simple but effective way for FIs to prepare for a variety of incidents is through tabletop testing. Tabletop exercises are simulated incidents that determine how well your plan helps you respond to an event.  

Conduct tabletop testing and functional exercises to ensure the effectiveness of your incident response plan and identify any issues that need to be addressed.  

Notification of the incident response team 

Every organization's incident response team (IRT) will look different depending on available resources, but it is ideal to assign a dedicated incident response manager to oversee the process and ensure that roles and responsibilities are clearly defined. 

A manager doesn’t need specific technical knowledge of firewalls and information technology (IT). Instead, they should be comfortable taking on a project manager role, be highly organized, and possess strong communication skills. 

Communication plan 

The communication process can begin once the incident response team (IRT) and appropriate parties have been notified.  

Develop a communication plan to relay information to customers, members, consumers, employees, regulators, law enforcement, and the public (if needed). Include internal and external communication procedures and messaging scripts.  

Other components to consider in an Incident Response Plan 

• Mission statement and goals​. It's important to remember the purpose of the incident response plan in relation to your institution’s values, such as safety, security, and transparency. Define specific mission statements and objectives for incident response to align with your FI’s values and objectives. 
• Incident detection procedures​. Make sure that your incident detection procedures and associated systems are up to date. It's crucial to have updated risk assessments to translate lessons learned into policies that can guide your cybersecurity and incident detection procedures. Incident tracking, which involves identifying and recording incidents in a centralized location, is also essential for documenting vendor activities that could lead to future incidents. 
• Incident analysis​. Once the incident is detected, the IRT can analyze the extent of the damage and its type. Establish procedures for an analysis process that will help you understand and effectively respond to the situation.  
• Containment and eradication​. Define procedures for halting the incident and preventing further damage. Different incidents will involve different procedures, so reference guidance from regulatory bodies, such as the Cybersecurity and Infrastructure Security Agency’s (CISA’s) Cybersecurity Incident & Vulnerability Response Playbooks, for eradication and recovery best practices. 
• Roles and responsibilities​. While the IRT team oversees incident response, other employees and departments have roles in incident response management. Identify key members from relevant departments to handle different aspects of incident response. Teams that should be part of the incident response process include (but are not limited to):
  
  • Risk
  • Audit
  • Compliance
  • IT/Information Security
  • Operations Officer
  • Legal
  • Public Relations/Communications
  • Human Resources
  • Documentation Coordinator
  • Senior Management
• Documentation requirements​. The saying goes, "If it wasn't documented, it didn't happen." Document your incident response process in real time to avoid missing key details you may not remember later.
• Recovery of system or operations​. The type and extent of the incident will determine how fast operations can be recovered. Determine the Recovery Time Objective—the maximum, tolerable length of time a computer, system, network, or application can be down after a failure or disaster occurs—to help you effectively restore function in your institution.   

While certain plan components, such as communication with regulators and consumers, are essential for compliance, FIs should tailor their plans to fit their institution’s unique needs.  

Postmortem analysis: What comes next? 

What does your FI do after an incident? Is it business as usual, or do you implement what you have learned?  

Postmortem analysis is a crucial part of an incident response plan. Update your risk assessments to determine necessary control fixes and conduct a gap analysis to identify unexpected events during the incident. Make necessary adjustments to policies and procedures to prevent unforeseen events from occurring in the future. A comprehensive findings solution can help consolidate your findings from postmortem analyses, compliance reviews, exams, and audits in one place.  

By understanding what qualifies as an incident and having a comprehensive plan, FIs can minimize the impact of incidents on their operations, customers and members, and employees. Incident response planning takes time, but being prepared and having the resources to address and mitigate incidents quickly can make a significant difference when it matters most.  

For more information on the components of the incident response plan—including best practices from our team's compliance, business continuity, and ERM experts—see our Incident Response Plan Checklist.